Question 1

Changes in current assets and current liabilities accounts deal with financing activities.

Accepted Answer

A) True 
 B)False  False

Question 2

The difference between the direct and indirect method of computing the cash flow statement occurs in the:

Accepted Answer

A) financing activities section. 
B) operating activities section. 
C) investing activities section. 
D) managing activities section. 
A) financing activities section. 
B) operating activities section. 
C) investing activities section. 
D) managing activities section. B

Question 3

Dividends received on investments made in the stock of other companies is an example of a financing activity.

Accepted Answer

A) True 
 B)False  False

Question 4

Which of the following would be included in the net cash flows from operating activities section of a cash flow statement using the indirect method?

Accepted Answer

A) Sales of plant,property and equipment 
B) Making loans and paying out interest 
C) Payment of interest and expenses 
D) Issuing bonds and notes 
A) Sales of plant,property and equipment 
B) Making loans and paying out interest 
C) Payment of interest and expenses 
D) Issuing bonds and notes

Question 5

Activities that pay and collect interest on loans are:

Accepted Answer

A) financing and investing activities. 
B) operating and financing activities. 
C) operating and investing activities. 
D) marketing activities. 
A) financing and investing activities. 
B) operating and financing activities. 
C) operating and investing activities. 
D) marketing activities.

Question 6

The board of directors is considering approving a plant expansion which will require a sizable advance payment to take place early this year.How will this decision affect the period's cash flows from investing-direct method?

Accepted Answer

A) It will increase this period's cash flows from investing. 
B) It will decrease this period's cash flows from investing. 
C) It will not affect this period's cash flows from investing. 
D) This is not listed in the statement of cash flows. 
A) It will increase this period's cash flows from investing. 
B) It will decrease this period's cash flows from investing. 
C) It will not affect this period's cash flows from investing. 
D) This is not listed in the statement of cash flows.

Question 7

The net income reported on the income statement for the current year was $60,000.Depreciation recorded on fixed assets was $31,000.What is the cash flow from operations that would appear on a cash flow statement using the indirect method?

Accepted Answer

A) $29,000 
B) $60,000 
C) $31,000 
D) $91,000 
A) $29,000 
B) $60,000 
C) $31,000 
D) $91,000

Question 8

In the statement of cash flows,which event would cause net income to be increased?

Accepted Answer

A) A decrease in Inventory 
B) An increase in Prepaid Insurance 
C) A decrease in Accounts Payable 
D) An increase in Accounts Receivable 
A) A decrease in Inventory 
B) An increase in Prepaid Insurance 
C) A decrease in Accounts Payable 
D) An increase in Accounts Receivable

Question 9

The records of Ashley Boutique showed Net Loss,$25,000; Depreciation Expense,$35,000; and increase in Supplies on Hand,$8,000.The amount of Net Cash Flow from Operating Activities using the indirect method is:

Accepted Answer

A) $18,000. 
B) $ 2,000. 
C) ($18,000). 
D) ($2,000). 
A) $18,000. 
B) $ 2,000. 
C) ($18,000). 
D) ($2,000).

Question 10

Selling stocks of other companies for cash would result in:

Accepted Answer

A) an increase of cash flow from investing activities. 
B) a decrease of cash flow from investing activities. 
C) an increase of cash flow from financing activities. 
D) a decrease of cash flow from financing activities. 
A) an increase of cash flow from investing activities. 
B) a decrease of cash flow from investing activities. 
C) an increase of cash flow from financing activities. 
D) a decrease of cash flow from financing activities.

Question 11

The balance of Supplies has decreased during the year.How would this event affect the statement of cash flows operations section-indirect method?

Accepted Answer

A) It is already included in the net income. 
B) It would affect the operations section positively. 
C) It would affect the operations section negatively. 
D) Does not affect the cash flow from operations. 
A) It is already included in the net income. 
B) It would affect the operations section positively. 
C) It would affect the operations section negatively. 
D) Does not affect the cash flow from operations.

Question 12

When preparing the statement of cash flows by the indirect method,if current liabilities increase the difference is:

Accepted Answer

A) added to net income. 
B) added to investments. 
C) deducted from net income. 
D) subtracted from investments. 
A) added to net income. 
B) added to investments. 
C) deducted from net income. 
D) subtracted from investments.

Question 13

The accuracy of the statement of cash flows,regardless of method used,can be verified by computing the change in the balance of:

Accepted Answer

A) cash. 
B) equity. 
C) revenue. 
D) liabilities. 
A) cash. 
B) equity. 
C) revenue. 
D) liabilities.

Question 14

If a gain of $70,000 is incurred in selling equipment having a book value of $225,000,cash flow will increase:

Accepted Answer

A) $295,000. 
B) $155,000. 
C) $70,000. 
D) some other number. 
A) $295,000. 
B) $155,000. 
C) $70,000. 
D) some other number.

Question 15

Cash generated from operating activities may be computed by using:

Accepted Answer

A) the indirect method. 
B) the direct method. 
C) either the direct or indirect method. 
D) the combination method. 
A) the indirect method. 
B) the direct method. 
C) either the direct or indirect method. 
D) the combination method.

Question 16

Indicate the effect that each of the following transactions has on the cash balance.Use (I)for increase,(D)for decrease,and (N)for no change.
a)________ Issued common stock for cash
b)________ Acquired land for cash
c)________ Purchase equipment on account
d)________ Paid a cash dividend
e)________ Purchased supplies on account
f)________ Received payment on account
g)________ Borrowed money by issuance of a long-term debt
h)________ Purchased equipment on account to be paid within one year

Accepted Answer

a)I,b)D,c)

Question 17

Common stock in exchange for a warehouse would be reported in the statement of cash flows in:

Accepted Answer

A) a separate schedule. 
B) operating activities. 
C) financing activities. 
D) investing activities. 
A) a separate schedule. 
B) operating activities. 
C) financing activities. 
D) investing activities.

Question 18

Operating expenses other than depreciation for the year were $335,000.Prepaid expenses decreased by $7,000.Cash payments for operating expenses to be reported on the cash flow statement using the direct method would be:

Accepted Answer

A) $335,000. 
B) $342,000. 
C) $328,000. 
D) $7,000. 
A) $335,000. 
B) $342,000. 
C) $328,000. 
D) $7,000.

Question 19

A statement of cash flows:

Accepted Answer

A) has three main sections: net cash flow from operating,investing,and financing activities. 
B) may be computed directly or indirectly. 
C) is a statement used to better understand the financing and investing activities. 
D) All of the above are correct. 
A) has three main sections: net cash flow from operating,investing,and financing activities. 
B) may be computed directly or indirectly. 
C) is a statement used to better understand the financing and investing activities. 
D) All of the above are correct.

Question 20

Big Toy Corporation's records show profit of $30,000; depreciation expense of $10,000; and cash dividends declared and paid of $5,000.The amount of cash used in operating activities using the indirect method is:

Accepted Answer

A) $40,000. 
B) $30,000. 
C) $20,000. 
D) $10,000. 
A) $40,000. 
B) $30,000. 
C) $20,000. 
D) $10,000.

Exam 21: Statement of Cash Flows

Changes in current assets and current liabilities accounts deal with financing activities.

The difference between the direct and indirect method of computing the cash flow statement occurs in the:

Dividends received on investments made in the stock of other companies is an example of a financing activity.

Which of the following would be included in the net cash flows from operating activities section of a cash flow statement using the indirect method?

Activities that pay and collect interest on loans are:

The board of directors is considering approving a plant expansion which will require a sizable advance payment to take place early this year.How will this decision affect the period's cash flows from investing-direct method?

The net income reported on the income statement for the current year was $60,000.Depreciation recorded on fixed assets was $31,000.What is the cash flow from operations that would appear on a cash flow statement using the indirect method?

In the statement of cash flows,which event would cause net income to be increased?

The records of Ashley Boutique showed Net Loss,$25,000; Depreciation Expense,$35,000; and increase in Supplies on Hand,$8,000.The amount of Net Cash Flow from Operating Activities using the indirect method is:

Selling stocks of other companies for cash would result in:

The balance of Supplies has decreased during the year.How would this event affect the statement of cash flows operations section-indirect method?

When preparing the statement of cash flows by the indirect method,if current liabilities increase the difference is:

The accuracy of the statement of cash flows,regardless of method used,can be verified by computing the change in the balance of:

If a gain of $70,000 is incurred in selling equipment having a book value of $225,000,cash flow will increase:

Cash generated from operating activities may be computed by using:

Common stock in exchange for a warehouse would be reported in the statement of cash flows in:

Operating expenses other than depreciation for the year were $335,000.Prepaid expenses decreased by $7,000.Cash payments for operating expenses to be reported on the cash flow statement using the direct method would be:

A statement of cash flows:

Big Toy Corporation's records show profit of $30,000; depreciation expense of $10,000; and cash dividends declared and paid of $5,000.The amount of cash used in operating activities using the indirect method is:

Accounting Concepts and Procedures

Debits and Credits: Analyzing and Recording Business Transactions

Beginning the Accounting Cycle

The Accounting Cycle Continued

The Accounting Cycle Completed

Banking Procedure and Control of Cash

Calculating Pay and Payroll Taxes: The Beginning of the Payroll Process

Paying,recording,and Reporting Payroll and Payroll Taxes: The Conclusion of the Payroll Process

Sales and Cash Receipts

Purchases and Cash Payments

Preparing a Worksheet for a Merchandise Company

Completion of the Accounting Cycle for a Merchandise Company

Accounting for Bad Debts

Notes Receivable and Notes Payable

Accounting for Merchandise Inventory

Accounting for Property, plant, equipment, and Intangible Assets

Partnership

Corporations: Organizations and Stock

Corporations: Stock Values, dividends, treasury Stocks, and Retained Earnings

Corporations and Bonds Payable

Analyzing Financial Statements

The Voucher System

Departmental Accounting

Manufacturing Accounting

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